February 16, 2011
By Staff Reporter
By Andrew Bushe
DUBLIN — Inflation increased sharply to an annualized 3.4 percent in December, the highest since May 1992, according to consumer price index figures released by the Central Statistics Office.
Average inflation for the 11 EMU countries is about 1.6 percent, less than half the Irish rate.
An increase of over 15 percent in excise duty on tobacco in the December budget accounted for over 70 percent of the monthly rise, which was also boosted by dearer mortgages and higher oil prices resulting in dearer fuel and transport costs.
The index rose 1.1 percent in December, compared to a decrease of 0.1 percent in December 1998.
Over the whole of 1999, prices increased on average by 1.6 percent, compared to an average increase of 2.4 percent in 1998.
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There are fears that a tight labor market, with unemployment down to 5 percent, may boost inflation further as trade unions seek higher wages to compensate.
The continued problems with the euro may also fuel inflation. About a third of imports come from the Britain and the high rate of sterling to the punt has made them dearer.
Intense competition as major British stores struggle to establish themselves in Irish shopping centers has minimized the effect of some imports. During he year, clothing and footwear prices dropped by 0.4 percent and household goods were down 0.02 percent.
The government no longer has the power to raise interest rates to combat inflation as the economy is subject to monetary policy set by the European Central Bank as a result of membership of the EMU.
The index, calculated according to EU harmonization standards, which excludes 13 percent of the Irish index, rose 3.9 percent in the year to December.
The figures show that the EU measure of Irish inflation in November at 3 percent was the highest in the 15 countries.